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Five reasons gas prices rise

Forget the political bluster on gas pump pain. Prices go up for complicated factors that don't fit neatly on a bumper sticker. And presidents can't wave their magic wands and bring back $2.50 a gallon.

As I write this, regular gasoline is at 2008 levels, more than $4 a gallon, in California, Hawaii and Alaska, and pretty darn close to that ($3.94) at stations down the street from where I live in Connecticut. Gas prices have risen 29 cents a gallon since December.

Pain at the pumps is very real, but can we attribute it to President Obama’s “radical environmentalism,” to use Rick Santorum’s catchy phrase? Nah. As the Washington Post put it, “Readers should immediately discount anything politicians say about gas prices.” And that includes Newt saying, “If you would like to have an American energy policy, never again bow to a Saudi king and pay $2.50 a gallon, Newt Gingrich will be your candidate.” And House Speaker John Boehner pointing out that “gas prices have more than doubled since the president took office.” Here are five real reasons why fuel prices are climbing, and Obama’s stalling of the Keystone XL pipeline isn’t on the list.

1. Demand: Think of a seesaw. The recession depressed oil demand, which depressed gas prices. As the global recovery takes hold, more people are working — and driving. Perhaps somebody should explain this to Speaker Boehner. This phenomenon isn’t reflected so much in U.S. statistics — because we’ve seen a steady decline in vehicle miles traveled — but as an international trend, it’s a big factor. “Rising Demand for Oil Spells More Price Pain,” reports the Wall Street Journal. The story adds, “Analysts warn that oil could become even more expensive in the second half of the year as supplies struggle to catch up with rising demand.” As a concerned citizen, the best thing you can do about this is drive less and buy a fuel-efficient or electric car. (Ignore Gingrich when he says you can’t put a gun rack on a Chevy Volt — you actually can.)

2. Global politics: The prospect of an Iranian blockade of the Straits of Hormuz, through which flows a fifth of the world’s oil, has led to panic buying in Europe and Asia, and that inflates prices. There’s a whole lotta hoarding going on. U.S.-imposed sanctions also mean that Iranian production could fall by more than 300,000 barrels a day for want of buyers. Oil production has also been disrupted by political unrest in Sudan, Nigeria and Yemen. Considering that the Republican candidates are, if anything, far more belligerent towards Iran than Obama is (Newt: “Unless they unilaterally disarm their entire system, we are going to replace their regime”), I doubt they’d favor ending the sanctions to make oil cheaper on international markets.

3. Speculation: According to Commodities Futures Trading Commissioner Bart Chilton, “A Goldman Sachs study last year stated that each million barrels of net speculative length in the markets adds as much as eight to 10 cents to the price of a barrel of crude oil.” There’s a 22 percent cut paid to Wall Street speculators before gasoline is refined, he claims, adding that a typical Ford-F150 fill-up will include $14.56 paid to speculators. Yikes! Neither party has a stellar record of curtailing Wall Street excess, but the Economic Populist reports that oil speculation by politically connected hedge funds — including one led by a major donor to “Karl Rove’s network of attack groups” — were a factor in the 2008 oil price spike. The news will, I’m sure, lead all Republican candidates to disavow campaign contributions from such sources. Check out Commissioner Chilton on this video:

4. It’s seasonal: It’s unusual for prices to spike this early in the year. Usually the rise happens in the spring and summer, because that’s when people really hit the road — going on vacation, taking country drives, visiting relatives. “It’s early in the year,” said Mike Evans of Atlas Oil told the Toledo Blade. “We’re not in the high-demand part of the year yet. You don’t want to be going into spring this high.” Another reason summer prices are higher is because that’s when smog is a big issue, and the cleaner-burning fuels at pumps then are more expensive to produce. So, again, rising demand bumps up against limited supplies and raises prices.

It’s easy to tell people on the campaign trail that you’re going to bring deliverance with $2.50 a gallon gas, but it’s an empty promise. Presidents can’t affect all the factors listed here, and many others that I’m missing, that result in high oil prices. The best approach is to opt out of the fossil-fuel nightmare, and that’s why the global auto fleet is electrifying. That way, we plug into domestically produced energy and it doesn’t matter what happens in the Straits of Hormuz.

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